FINRA is concerned about the little investor using leveraged ETFs? This is not about protecting the little investors. It's about what some large investment firms want. This is the second assault on these investment products. Back in December of 2015 the SEC Chair Mary Jo White tried to rein in leveraged index funds. It's funny the concern over the individual investors when back in 1999 we saw the repeal of the Glass-Stegall Act. This set the stage for what Warren Buffett called "weapons of finical destruction". Monstrous financial firms with the unlimited power they wield over both sides of congress, got what they wanted, and were quick to use their new power to create billions of dollars of dangerous derivatives. In 2008 when it began to implode Congress hastily signed a bill handing over billions of taxpayer dollars which went to CEO bonuses, to share buybacks, and to open factories in developing nations permanently eliminating U.S. Jobs. In 2014, they continued the trend of deregulation by repealing a section of the Dodd-Frank bill which was put in place after the Finical Crisis specifically to stop the growth of derivatives. For the big boys like AIG, Banks, and others, the game is on. They get to run their little "bucket shops" of derivatives, taking bets on anything and everything. It's fine for them, and why not, they have the taxpayers to bail them out. Now as an individual investor I can trade pork belly futures on the CME. I can trade currencies on the Forex exchange. I can trade metals on the COMEX. I can trade in the futures markets until the cows come home, and this is just fine. Bet against Apple in the options market, no problem. So why would you pick on one instrument class such as 3X leveraged funds as the limit of my understanding. You must be joking. Funds such as QQQ, UDOW or URTY allow me to diversify and control risk without the complexity of say, trading option contracts. These funds are incredibly easy to understand and they simplify and level the playing field for the little guy. You can use them to better your returns over time, using a 3X index fund by dollar cost averaging into it. Or you might want to control your downside while protecting your upside. How? Say you have a 100k to invest. If you purchased 33K in say UDOW for example. You have limited your downside to the 33K, but you will earn near the same results as if you invested all 100k in the underlying index, and at the same time have 66K to invest, in perhaps some bonds or other fixed instruments. Thus you're increasing your return as compared to the index while controlling the downside risk. There are other ways to use these funds obviously, depending on one's goals, but they are no harder to understand than any other investment, in fact they are easier. Why do you want to regulated them? I'm quite sure it is because of some in the investment world, perhaps Black Rock, Vanguard, or State Street, don't like them. Is it that ProFunds have eaten some of their pie? So don't [REDACTED] the little guys here. Leave us have our 3X funds. They have been a game changer and they helped level the playing field a bit for the little guy. Besides, you won't ever have to bail us out as you no doubt will with the big boys next time the [REDACTED] hits the fan, and their derivative bets come due. You should be focused on them, not us. I'm sick to death of bureaucrats pretending to protect me while they screw me over. Please don't bother. Cheers
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Timothy Dunlap Comment On Regulatory Notice 22-08
FINRA is concerned about the little investor using leveraged ETFs? This is not about protecting the little investors. It's about what some large investment firms want. This is the second assault on these investment products. Back in December of 2015 the SEC Chair Mary Jo White tried to rein in leveraged index funds. It's funny the concern over the individual investors when back in 1999 we saw the repeal of the Glass-Stegall Act. This set the stage for what Warren Buffett called "weapons of finical destruction". Monstrous financial firms with the unlimited power they wield over both sides of congress, got what they wanted, and were quick to use their new power to create billions of dollars of dangerous derivatives. In 2008 when it began to implode Congress hastily signed a bill handing over billions of taxpayer dollars which went to CEO bonuses, to share buybacks, and to open factories in developing nations permanently eliminating U.S. Jobs. In 2014, they continued the trend of deregulation by repealing a section of the Dodd-Frank bill which was put in place after the Finical Crisis specifically to stop the growth of derivatives. For the big boys like AIG, Banks, and others, the game is on. They get to run their little "bucket shops" of derivatives, taking bets on anything and everything. It's fine for them, and why not, they have the taxpayers to bail them out. Now as an individual investor I can trade pork belly futures on the CME. I can trade currencies on the Forex exchange. I can trade metals on the COMEX. I can trade in the futures markets until the cows come home, and this is just fine. Bet against Apple in the options market, no problem. So why would you pick on one instrument class such as 3X leveraged funds as the limit of my understanding. You must be joking. Funds such as QQQ, UDOW or URTY allow me to diversify and control risk without the complexity of say, trading option contracts. These funds are incredibly easy to understand and they simplify and level the playing field for the little guy. You can use them to better your returns over time, using a 3X index fund by dollar cost averaging into it. Or you might want to control your downside while protecting your upside. How? Say you have a 100k to invest. If you purchased 33K in say UDOW for example. You have limited your downside to the 33K, but you will earn near the same results as if you invested all 100k in the underlying index, and at the same time have 66K to invest, in perhaps some bonds or other fixed instruments. Thus you're increasing your return as compared to the index while controlling the downside risk. There are other ways to use these funds obviously, depending on one's goals, but they are no harder to understand than any other investment, in fact they are easier. Why do you want to regulated them? I'm quite sure it is because of some in the investment world, perhaps Black Rock, Vanguard, or State Street, don't like them. Is it that ProFunds have eaten some of their pie? So don't [REDACTED] the little guys here. Leave us have our 3X funds. They have been a game changer and they helped level the playing field a bit for the little guy. Besides, you won't ever have to bail us out as you no doubt will with the big boys next time the [REDACTED] hits the fan, and their derivative bets come due. You should be focused on them, not us. I'm sick to death of bureaucrats pretending to protect me while they screw me over. Please don't bother. Cheers